CASE STUDY OF SHALE OIL PRODUCTION SI SO LI CHIAN A project report submitted in partial fulfilment of the requirements for the award of Bachelor of Engineering (Hons.) Petrochemical Engineering Faculty of Engineering and Green technology Universiti Tunku Abdul Rahman April 2016 ii DECLARATION I hereby declare that this project report is based on my original work except for citations and quotations which have been duly acknowledged. I also declare that it has not been previously and concurrently submitted for any other degree or award at UTAR or other institutions. Signature : Name : Si So Li Chian ID No. : 11AGB04580 Date : iii APPROVAL FOR SUBMISSION I certify that this project report entitled “CASE STUDY OF SHALE OIL PRODUCTION” was prepared by SI SO LI CHIAN has met the required standard for submission in partial fulfilment of the requirements for the award of Bachelor of Engineering (Hons.) Petrochemical at Universiti Tunku Abdul Rahman. Approved by, Signature : Supervisor : Ir. Dr. Low Chong Yu Date : iv The copyright of this report belongs to the author under the terms of the copyright Act 1987 as qualified by Intellectual Property Policy of Universiti Tunku Abdul Rahman. Due acknowledgement shall always be made of the use of any material contained in, or derived from, this report. © 2016, Si So Li Chian. All right reserved. v ACKNOWLEDGEMENTS I would like to thank everyone who had contributed to the successful completion of this project. I would like to express my gratitude to my research supervisor, Ir. Dr. Low Chong Yu for his invaluable advice, guidance, his enormous patience and time for leading me throughout the development of the research. In addition, I would also like to express my gratitude to my loving parent and friends who had helped and given me encouragement throughout my degree. In particular, the unconditional support, patience and understanding shown by my parents during honour year are greatly appreciated. vi CASE STUDY OF SHALE OIL PRODUCTION ABSTRACT Shale oil or retort oil is rapidly emerging as a significant unconventional fuel in USA and successfully found a place in the world energy mix. The production of shale oil lowered the current crude oil prices proved that this type of viable energy has high potential to spread globally over the next couple of decade. The global energy markets will start to shift from petroleum/crude oil to shale oil as the impeding shortage of petroleum reserves in the coming decade. This project presents an overview of the typical shale oil production and its technologies, upgrading of shale oil, environmental impacts and control technologies, shale oil future trends and future development as it is the most viable energy over the next couple of decade. Although OPEC endures its price war against upstart US shale oil and subsequently affect the marginal barrel output of shale oil, US shale industries are still possible to have a longstanding impact on global oil market due to the invention of new production techniques or technologies and more flexible financing system. The flexibility of US shale oil makes them capable to bounce back rapidly as global oil prices recoup. The establishment time between the decision of investment and operation in shale oil production is shorter as it can be measured in weeks compared to crude oil production which might take for years also one of the reasons for shale oil to adapt and respond quickly to the changes in global oil prices. vii TABLE OF CONTENTS DECLARATION ii APPROVAL FOR SUBMISSION iii ACKNOWLEDGEMENTS v ABSTRACT vi TABLE OF CONTENTS vii LIST OF FIGURES ix LIST OF SYMBOLS / ABBREVIATIONS xi CHAPTER 1 INTRODUCTION 1 1.1 Background 1 1.2 Problem Statement 3 1.3 Aims and Objectives 4 1.4 Scope of Study 4 2 LITERATURE REVIEW 5 2.1 Shale Oil Extraction / Process Methods 5 2.1.1 Surface Processing 6 2.1.2 In-situ Processing 7 2.2 Surface Processing Technologies 8 2.2.1 Kiviter Process 8 2.2.2 Galoter Process 9 2.2.3 Chinese Fushun Process 10 2.2.4 Petrosix Process 11 2.2.5 The Alberta Taciuk Process 11 viii 2.3 In-situ Processing Technologies 12 2.3.1 Royal Dutch Shell In-situ Conversion Process 12 2.3.2 American Shale Oil CCR Process 14 2.3.3 Chevron Crush Process 14 2.3.4 ExxonMobil Electrofrac Process 15 2.4 Classification of Oil Shale 16 2.5 Upgrading of Shale Oil 18 3 METHODOLOGY 20 3.1 Accumulation of Data 20 3.2 Comprehensive Study of Data 20 3.3 Organization of Data 21 3.4 Analyses of Data 21 3.5 Research Flowchart 22 4 RESULTS AND DISCUSSION 23 4.1 Environmental Impacts and Control Technologies 23 4.1.1 Water Pollution and Control Technologies 23 4.1.2 Air Pollution and Control Technologies 24 4.2 Impacts to World Economy and Global Oil Prices 26 4.3 Future Energy Outlook and Requirements 34 4.4 Impacts of Low Oil Prices toward Shale Oil Production 38 4.5 Lasting Impacts of Shale Oil Production on Global Oil Market Dynamics 42 5 CONCLUSION AND RECOMMENDATION 45 5.1 Conclusion 45 5.2 Recommendation 46 REFERENCES 47 ix LIST OF FIGURES FIGURE TITLE PAGE 2.1 Overview of Shale Oil Extraction Methods 5 2.2 Surface Processing Steps 6 2.3 In-situ Processing Steps 7 2.4 Kiviter Retorting Process 9 2.5 Galoter Retorting Process 10 2.6 Alberta Taciuk Processor Retort 12 2.7 Royal Dutch Shell Oil Company In-situ Conversion Process 13 2.8 Shell’s Freeze Wall for In-situ Conversion Process 13 2.9 American Shale Oil CCR Process 14 2.10 ExxonMobil Electrofrac In-situ Process 16 2.11 Hutton Classification Schema for Oil Shale 17 3.1 Flowchart of Research 22 4.1 WTI and Brent Oil Price Spread with Shale Oil Production from 2004 to 2012 27 4.2 Global Oil Market Share in 2014 28 4.3 Total Global Oil Production in 2014 29 4.4 WTI and Brent Crude Oil Price from June 2010 to June 2015 30 x 4.5 Forecast of Oil Price Incorporating Impact of Shale Oil production vs. EIA Forecast 31 4.6 Global Oil Production by Resources 31 4.7 Forecast of OPEC production in PWC reference case vs. EIA reference case 32 4.8 % of Global GDP Benefits from a Lower Oil Price 33 4.9 Change in % of Global GDP in Alternative Oil Price Scenarios 34 4.10 Forecast of Global Primary Energy Production Growth 35 4.11 Forecast of Global New Sources Energy Growth 35 4.12 Remaining Technically Recoverable Resources 36 4.13 Cumulative Production of Unconventional Resources from 2013-2035 36 4.14 Largest Growth of Oil Production 37 4.15 North America New-well Production per Rig 37 4.16 Growth of Shale Oil Supply 38 4.17 WTI Global Crude Oil Prices 39 4.18 Brent Global Crude Oil Prices 39 4.19 Changes in Production of US Shale Oil for a range of 2020 Oil Prices 40 4.20 Hydraulic Fracturing and Horizontal Drilling 43 xi LIST OF SYMBOLS / ABBREVIATIONS ATP Alberta Taciuk Process CCR conduction, convection, reflux ICP in-situ conversion process SCF supercritical fluid BBL barrel Ft feet % percent 1 CHAPTER 1 INTRODUCTION 1.1 Background Shale oil, also known as retort oil or light tight oil, is the unconventional oil produced from oil shale rock fragment. Shale oil contains large amount of hydrocarbon compounds such as paraffin, olefin, aromatics and heteroatoms. The extraction process of shale oil includes pyrolysis, hydrogenation and thermal dissolution of oil shale. Raw shale oil extracted from oil shale can be used as fuel oil directly. However, most of the application of shale oil requires it to be re-processed as hydrocarbon fuel or transport fuel. The origin of shale oil, which is known as oil shale, is a large reservoir of untapped hydrocarbon resource. Oil shale contains cruel oil content. It is a sedimentary rock containing large quantities of solid and insoluble naturally occurring organic matter like kerogen, where the shale oil can be extracted. In shale oil refining, there are two basic methods to extract kerogen from oil shale. First method is a cracking process named as surface retorting used to break down the kerogen by heating it in absence of oxygen to release hydrocarbons and produce low molecular weight products such as nitrogen, oxygen and sulphur. Retorting can be applied at factory site after the oil shale is mined. Second method is in-situ method, where oil shale is heated underground and the liquefied kerogen is pumped to the surface (Speight James, 2011). 2 The use of oil shale has been known for thousands of years. In 1830, oil shale has been used as a commercial resource in France. It was mined and cooked in small quantities to produce oil to light oil lamps (Western Resources Advocates, 2013). Oil shale production had reached one million metric tons per year during the 1800s and by 1881. The production of oil shale in Scotland was between 1 and 4 million metric tons per year from 1881 to 1955 (Western Resources Advocates, 2013). Production began to cease due to technological insufficiency, unprofitability, unsolvable environmental side effects and also the cheaper supplies of petroleum crude oil in 1966. Commercialize oil shale in USA beginning in the mid-1970s but ending in 1991 due to poor technological reliability (Speight James, 2011). Nowadays, oil shale deposit is widely distributed around the world like Estonia, Russia, China, Brazil and USA. Several main purposes of oil shale include direct combustion to obtain heat as well as to generate electricity, to produce shale oil used as transport fuel and also as a source of other valuable chemicals.